What you — and your employees — need to know about the Affordable Care Act

Joel Cantor, of the Center for State Health Policy, says 1 million New Jerseyans lack insurance. - (NJBIZ File)

This is for the New Jersey business owners who have been too busy running their companies to pay attention to the Affordable Care Act.

You can't put it off any longer.

Starting Oct. 1, three health insurance companies will be competing for new customers on New Jersey's exchange, known as the Marketplace. Once the pricing comes out — expected next week — your employees will be looking to you to see what happens to their coverage. Will you start providing insurance to your employees? Will you offer them more money that, coupled with federal subsidies, can make insurance affordable? Will you do nothing, and risk losing your top talent to a rival that's doing one of the first two things?

It's too early to say how all this will shake out for sure, especially since pricing still isn't available and the public — let alone the health care industry — has many more questions than answers. But since it's not going away, we're going to break down this complex issue for you. Here's what you need to know about the ACA and how it will affect your business.

What is specifically required under the law? What are the penalties?

Broadly, the ACA requires most Americans to get coverage in 2014. It will do so by providing subsidies to make it more affordable for people of moderate means to buy coverage, and is leaning on insurers to help explain how to go about shopping for coverage — a new concept for most people, even those with coverage, who are used to an employer making those decisions for them.

But critics say the penalties may be too weak to force people who don't want coverage to get it. Those who don't comply will be fined $95 or 1 percent of annual income, whichever is higher. For many uninsured, the penalty is far lower than the cost of buying health insurance.

What options are there for small companies?

The most ready choice is the SHOP exchange, short for the Small Business Health Options Program, which is limited to employers of fewer than 50 workers. The employer chooses a plan for their workers — they have to pick a single plan in 2014, but may have more options down the road. SHOP provides tax credits of up to 50 percent of the employer's share of the premium, and employers are eligible for tax credits if they have fewer than 25 workers, the average salary is less than $50,000 and the employer pays at least 50 percent of their workers' premiums.

Should employers encourage their workers to buy their own individual health insurance policies on the exchange?

For some employers, the best deal for their workers is a government-subsidized policy on the marketplace. Under the ACA, employers with fewer than 50 workers aren't required to offer insurance, and many of them don't — so for their lower-paid workers who don't have coverage, buying a subsidized policy on the marketplace may be the best bet.

Worth noting: The ACA requires employers with more than 50 full-time workers to offer health insurance, but the fine for noncompliance — $2,000 for each full-time worker, minus the first 30 full-timers — was postponed until 2015.

How will employers know if their workers can get subsidized insurance?

The subsidies are on a sliding scale. Subsidies start at 138 percent of the federal poverty and phase out completely at four times the federal poverty level — about $46,000 for an individual. Those below 138 percent of poverty are eligible for free health care from Medicaid.

How large will the subsidies be?

For a family of four with household income of $40,000, if the annual health insurance premium is $9,869, the government subsidy is $7,904, and the family pays $1,965 for coverage.

A good subsidy calculator is offered at the Kaiser Family Foundation website, kff.org. Horizon Blue Cross Blue Shield of New Jersey also offers "text-2-subsidy," where individuals can get an estimate of the amount they may be entitled to by texting "NJReady" to 222752 on a mobile phone.

How much will insurers charge?

The prices won't be known until the federal government releases the information, which is expected to happen on or about Oct. 1. That's when consumers find out how much each insurer is charging — and also when insurers see their competitors' prices.

Suppose there is a wide variation in the prices. Can the insurers raise or lower their prices?

No. Insurers must keep their prices in place for all of 2014, and can't change them until 2015.

Will there be wide variety in pricing from one insurance company to another?

Hard to say. All the insurers will offer nearly identical plans that conform to federal rules, and they must pay out at least 80 cents of every premium dollar for medical claims. The rates are reviewed by the state Department of Banking and Insurance, "which will not approve a lowball premium that doesn't cover the costs," one expert said.

Suppose I decide to buy a plan from one company, and then change my mind and want to switch to another?

You'll have to wait until the next open enrollment period, from Oct. 1, 2014 to March 31, 2015. The soonest a policy can take effect is Jan. 1, 2014, and once the consumer has paid the premium and the policy is active, it will be difficult to switch, unless the customer experiences a "life event" — a new job, marriage, the birth of a child and so on. The customer who cancels the policy without a life event can't buy a new one until the next open enrollment begins.

How will it work?

Starting Oct. 1, individuals and small businesses can go to healthcare.gov and compare health plans offered by each of the three insurance companies. Customers can find out how much of a subsidy, for individuals, or tax credits, for small businesses, they will get from the federal government to defray the cost of coverage. The marketplace will have a toll-free number, and customers can use the websites and telephone call centers of the insurance companies to enroll in coverage.

Will all the insurers offer the same health plans?

Yes. All insurers must offer plans that meet ACA medical coverage requirements with a choice of four price tiers: bronze, silver, gold and platinum. Those younger than 30 will be able to purchase low-cost "catastrophic" plans that don't provide extensive routine coverage, but will protect against financial disaster in the event of a serious accident or illness.

What should my employees look at in considering health plans?

Consumers should look at both the price and their health care needs. Someone who rarely goes to the doctor may do well with a low-premium policy that has high out-of-pocket expenses, while someone with a chronic illness might be better off paying a higher premium, but getting more medical care covered by the insurance plan. Shoppers should consider the insurer's network of hospitals and doctors if they want to have access to certain providers.

Will the marketplace be a good deal?

That depends on the circumstances. Right now, about 100,000 New Jerseyans have low-cost "basic and essential" plans, but so-called B&Es don't meet the standards of the ACA, and won't be available in 2014. Experts said about a third of B&E customers are younger than 30, and will be able to buy low-cost catastrophic plans on the marketplace. Other B&E customers will likely qualify for subsidies on the marketplace, but those who don't will face higher premiums in 2014.

Many of the uninsured don't buy coverage because they can't afford it — and if they don't qualify for a subsidy, many still won't be able to afford it. Ev Liebman, of AARP, estimated there are nearly 80,000 New Jerseyans between ages of 45 and 64 who are uninsured, and many will get subsidies: "We think these folks are going to find a lot of good on the marketplace — I'm optimistic that it will make things better."

E-mail to: beth@njbiz.comOn Twitter: @bethfitzgerald8

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Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.